Repair & Improve

Tax Credits for Energy Efficiency

How to get paid for saving energy

by Tom Kraeutler, AOL Home Improvement Editor

Tom Kraeutler is the Home Improvement Editor for AOL.  In this column, Tom provides an overview of the energy tax credits avaiable under the Federal EPACT program.

Thanks to the Energy Policy Act of 2005 (EPACT), the Federal Government has made it possible for you to make some green by living green through the end of 2007. Beginning January 1, 2006, and, in most cases, through December 31, 2007, energy-saving home improvement purchases for your U.S. residence are eligible for substantial tax credits.

The benefits of a green approach to home improvement can extend well beyond your tax return to include lower energy bills year-round, increased indoor comfort, and reduced air pollution.  Here are the main home categories covered by EPACT:

• Home shell: Includes insulation, windows, metal roofing, and sealing. Eligible for a credit of 10% of the cost per item, with a $500 maximum total credit for all improvements under this category.
• Heating and cooling equipment: Credits range from $50 for main air circulating fans to $300 for central AC systems.
• Solar energy systems: Solar water heating and photovoltaic systems (excluding those associated with hot tubs and swimming pools) can earn 30 percent of the system cost for up to $2,000, not limited to the $500 home improvement cap.
• Fuel cells and microturbine systems: Qualified systems are eligible for a credit of up to 30 percent of the system cost (up to $500 per 0.5 kW of capacity maximum), not limited to the $500 home improvement cap.

For an item-by-item guide to EPACT tax credits, click over to the ENERGY STAR website to view the Summary of Tax Credits for Homeowners.

Keep in mind that there are caps on the EPACT tax credits you can receive, and that the eligibility time span allows you to itemize improvements only once between two rounds of tax returns. If you didn’t make any purchases or upgrades in 2006, start 2007 with a little greening in mind: perform a home energy audit to determine where and how your home could perform better, budget for improvements, and start shopping for products with the ENERGY STAR label.

Shopping for a new home instead? Keep that ENERGY STAR in mind. EPACT rewards eligible contractors for building energy-efficient homes that earn the label, and even though you aren’t the one who gets the resulting tax credit, you’ll enjoy long-term benefits of comfort and energy savings.

Beyond the savings offered by the federal EPACT program, your home state, as well as your local utility company may offer additional rebates and incentives.  In fact, in most states, utility companies are required to offer energy saving programs which you should take advantage of.  Teaching you how to use less of thier product is a part of the price they pay for the monolopy they enjoy for getting to sell fuel to the rest of us.

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